What Keeps Claims Execs Up at Night

In part 1 of a two-part series, Accenture's Michael Costonis discusses what a company survey found were claims executives' pain points.

Multiple factors challenge P&C insurers as they search for profitable growth. These factors include changing consumer expectations, the explosion of structured and unstructured data, and continuing demands from management and shareholders to deliver better claims outcomes. This puts P&C insurers at a critical juncture in terms of the modernity and flexibility of their claims management systems.

Insurers' claims functions are trying to cope with these changes with workforces that have, in many cases, been cut in previous cost reduction efforts. In addition to these concerns, claims teams are dealing with changing types of risk, from the growth of cyber crime and organized fraud to the increase in the frequency and severity of natural events. While technology offers potential solutions to these problems, it poses its own challenges as insurers try to maintain maximum flexibility and adaptability in the face of tremendous uncertainty about the impact of innovative new solutions.

In such an environment, making the right investments in claims systems and organizations will be critical for U.S. property and casualty insurers. To gauge insurers' attitudes toward investing in claims, Accenture conducted quantitative survey research with C-level claims executives in March and April 2012. As we had anticipated, we found that most insurers agree on the lack of modernity and flexibility of their claims management systems, especially in terms of allowing change in system behaviors and business processes and in addressing consumers' evolving needs.

Claims executives said that improvement will be required in the claims organizations in order to be prepared and equipped to manage new forms and level of risk, and that consistency in claims handling can be optimized in order to improve loss costs.

Property and casualty insurers in the U.S. expect to spend considerable amounts of money --$17.5 million on average over the next three years – to upgrade and modernize their claims functions. Most insurers agree that their claims systems lack the modernity and flexibility to allow change in systems' behaviors and business processes and to address the evolving needs of consumers.

While the need for improvement in core systems is evident – as is the willingness on insurers' part to invest in replacing and/or upgrading key components – there is no one clear path to optimizing these significant investments. The biggest challenge, perhaps, is in anticipating future needs rather than responding to present concerns. In hockey terms, insurers' management and CIO teams have to skate to where the puck will be, rather than where it is now.

Essentially, insurers need to be able to deal with three key issues – transaction processing, analytics and collaboration – as they order their investment priorities.

In transaction processing, the emphasis should be on processing at the point of need, as well as making sure that the right person performs the right activity. While lower-value-adding activities should be automated, claims professionals with appropriate expertise should be able to interrogate claims on a near-real-time basis. The returns in terms of customer satisfaction, improved outcomes and lower costs remain extremely attractive for transaction processing improvements.

In analytics, insurers need their systems to be able to accept and process huge quantities of data, coming both from structured sources such as policy applications and claims reports, but also from unstructured sources such as GPS information. Without the ability to collect and analyze the growing volume of data available -- including insights about consumers from social media, usage data collected by means of telemetry and GPS, and asset damage records collected by millions of RFID devices – insurers are unable to take advantage of this information to refine and improve claims management. Third party databases developed by groups such as law enforcement and trade associations can be another key source of information, but systems need to be configured to integrate such information and process it seamlessly.

Finally, insurers need to enhance their capabilities in collaboration so that claims professionals can make the most of the information made available through new or upgraded systems. Investments in technologies such as file-sharing, videoconferencing, and instant messaging and chat services can help professionals share expertise while improving outcomes.

As our survey indicated, U.S. property and casualty insurers have a high awareness of the importance of the claims function and its ability to allow changes in systems and behaviors and to address changing consumer expectations, manage new forms of risk, and optimize claims outcomes. This awareness is matched by insurers' concerns about the modernity and flexibility of their own core claims systems. We will explore these survey findings – and their implications – in more detail in our second article.

About the author: Michael A. Costonis is a managing director in Accenture Property and Casualty Insurance Services.